Suppose a Linear Probability Model You Have Developed Finds There

question 58

Multiple Choice

Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated as:
PD_i = 0.15 (debt ratio) + 0.1 (profit margin)
A firm you are thinking of lending to has a debt ratio of 57 percent and a profit margin of 7.15 percent. Calculate the firm's expected probability of default, or bankruptcy.

• A) 9.27 percent
• B) 8.49 percent
• C) 7.83 percent
• D) 6.91 percent

Recognize the types and extents of liabilities partners have towards partnership obligations and third-party claims.

Understand the legal processes involved in the dissolution, winding up, and the distribution of assets in a partnership.

Identify the concept of implied, apparent, and actual authority within partnerships.

Understand the principles of partnership by estoppel and how they affect third-party relations.

---

Definitions:

AASB 137

An accounting standard that provides the accounting treatment and disclosure for provisions, contingent liabilities, and contingent assets.

Comparative Information

Financial data presented for multiple periods, allowing users to identify trends, measure performance, and make comparisons over time.

Unused Amounts

Portions of a line of credit or loan commitment that have not been borrowed as of a particular point in time.